How much can you afford?
Buying a home for most Canadians means signing up for a mortgage. A mortgage is a legal agreement between a lender and a homeowner. The loan is given in exchange for the title of the debtor’s property plus a marginal fee over the life of the loan. The title becomes void and owned by the debtor once paid in full.
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How to use the mortgage payments calculator
To use the calculator, start by entering the homes purchase price, then select an amortization period of 25 years or less and mortgage rate.
The calculator shows the best rates available in your province, but you can also add a different rate. The calculator will now show you what your mortgage payments will be.
The mortgage payment calculator will show the four different monthly payment options available at each down payment amount. It will automatically calculate the cost of your CMHC insurance which is insurance required on a down payment of less than 19.99%.
How to calculate your mortgage payments
There are a few different factors that go into understanding how much your monthly mortgage will be. To start:
- The total amount borrowed for the mortgage, meaning the home cost minus down payment plus insurance and all purchase fees
- The amortization or length of the mortgage
- The mortgage rate or interest rate on your loan
Lowering your mortgage payments
There are a few options to lower your mortgage payments including:
- Reduce the cost of the home
- Increase down payment
- Extend the amortization period
- Find a lower rate
- Or make your payment bi-monthly instead of monthly
What is CMHC Insurance?
CMHC insurance (or mortgage default insurance) protects lenders from mortgages that default. CMHC insurance is mandatory for all mortgages in Canada with down payments of less than 19.99%. This is an additional cost to you and is calculated as a percentage of your total mortgage amount. For more information on mortgage default insurance rates visit the CMHC website.
Decide on fixed or variable interest rates
Interest is the amount of money you’ll pay for borrowing money. There are two different options to choose from when getting a mortgage.
Fixed interest rates will stay the same for the entire term you signed for your mortgage which is on average 3 to 5 years. Fixed interest rates are usually higher than variable interest rates.
A fixed interest rate mortgage may be better for you if you want to:
- keep your payments the same over the term of your mortgage
- know in advance how much of your mortgage (principal) will be paid off by the end of your term
- keep your interest rate the same because you think there is a good chance that market interest rates will go up over the term of your mortgage
Variable interest rate mortgage
A variable interest rate can increase and decrease during the term. If you choose a variable interest rate, you may be offered a lower interest rate than the one you’d get if you selected a fixed interest rate.
A variable interest rate has a lower cost to cancel making it a better option if you are worried you will need to change something before your 3 to 5 year term is up.
Variable rates also work with the market so if your interest rate does not change in 5 years your payment on mortgage renewal may increase a lot if the market has changed.